U.s., The Great Consumer, Loses Producer Status

Commentary - Lee A. Iacocca, chairman and chief executive officer of Chrysler Corp., zeroes in on U.S. imports and exports, management of trade with Japan, and the possible effects of the Gramm-Rudman bill in the third part of his eight- column series of opinion articles. The next column will appear in February. - 1985, Los Angeles Times Syndicate

January 5, 1986|By Lee A. Iacocca

When I was a kid, America was the ``arsenal of democracy.`` Detroit was the car capital of the world, Pittsburgh was the steel capital of the world, Chicago was the hog butcher of the world, and just about every big city in the country was the world`s biggest producer of something.

But the world has changed in the last 40 years. Japan now produces more cars and trucks than we do, and America`s biggest role in the world economy has shifted from our ability to produce things to our ability to buy things.

We`ve become the world`s supermarket. We take 20 percent of the exports from the Common Market and Third World and a staggering 36 percent of Japan`s.

We`re great consumers, but whatever happened to the people in this country who used to produce things?

Let me tell you what happened to them. According to the Bureau of Labor Statistics, 457,000 of those who made steel just six years ago have lost their jobs. Employment in fabricated metals has dropped by 257,000, in heavy machinery by 341,000, in textiles and apparel by 340,000, and the list goes on and on.

They`re out of work because America is buying more than it`s selling to the rest of the world - $150 billion more this year alone. Somehow, we seem to have forgotten a basic law of economics: You have to sell things in order to buy things, or sooner or later you go broke.

What`s worse, as a country we don`t even have a simple plan for America to compete in the world. Every other country has a plan to manage its trade, but we`re the only dinosaurs left who maintain the myth that ``free trade`` really exists.

And I don`t understand it, because the government itself just published a book listing only those ``significant`` trade barriers we face around the world, and it`s 240 pages long! Some of them make me want to laugh, and some of them make me want to cry.

In Korea, for example, a citizen can get arrested for smoking an American cigarette. You can sell American apples in Sweden, but only after the Swedish crop is gone (and by that time ours are a little mushy). New Zealand puts a duty on canned salmon from America, but not from Canada. Spain discriminates against our squid, Portugal against our soybeans, and Taiwan has an outright ban on ``edible offals,`` whatever the hell they are!

We aren`t as pure as we act, either. We have by far the most open market in the world, but we, too, have restrictions on dozens of imports ranging from sugar to motorcycles. We even have a ban on avocados if they have pits in them (and every single one of them still comes with a pit!).

But the heavyweight champion of the world when it comes to managing trade is still Japan. Their list of restrictions is dazzling, and it covers everything from walnuts to frozen herring. Their game plan is simple: Take in American raw materials but not finished goods, because that costs jobs. So, they import American lumber, but not plywood; animal hides, but not leather goods; potatoes, but not potato chips; tomatoes, but not tomato puree.

They even pick on ravioli (Can you believe it?) We can send them all the ravioli we want as long as they are filled with cheese. But if they are filled with meat, there is a quota. That`s because they restrict U.S. beef. I guess they`re scared we`ll get around it by hiding tons of bootleg beef in all those little raviolis. (These guys really don`t take any chances!)

We`ve been fighting for years over baseball bats, and walnuts, and now ravioli. Meanwhile, in just five years, we`ve gone from a trade surplus of $40 billion with the rest of the world to a deficit of $150 billion - a negative swing of $190 billion in just 60 months.

We`ve shipped billions of dollars and millions of jobs overseas, and yet the government hasn`t been willing to write a tough, fair trade policy to stop the bleeding.

But sometimes you can get ahead in this world by accident, if you`re smart enough to recognize the opportunity. And last month, Congress provided a golden opportunity when it passed the Gramm-Rudman bill to cut our federal budget deficit back to zero in five years.

A lot of people (including me) have their doubts about Gramm-Rudman. It`s full of gimmicks, and it takes a meat-ax to some programs. Instead of Gramm- Rudman in 1985, we should have had ``Reagan-O`Neill`` in 1982, because with the right bipartisan leadership we wouldn`t have a $2 trillion national debt today, and we wouldn`t be grasping at desperate solutions.

But forget about the spilt milk. When I saw Gramm-Rudman, I hollered ``Eureka.`` Everybody was focusing only on how it might fix the budget deficit, but if we`re smart, we can make it a two-for-oner and use it to cut our trade deficit, too.

Here`s how.

I was in Japan last spring, a week after the Senate had voted, 92-0, to tell the president to retaliate against Japan for its unfair trade practices. People on both sides of the Pacific were scared that a trade war was about to erupt.